More Ontario homeowners sold within a year of buying as interest rates climbed, report finds

There’s been a “notable” increase in homeowners selling within one year of buying a property, particularly condos, since interest rate hikes started last year, according to a new report from land and commercial registry company Teranet.

The latest edition of Teranet’s market insight report examines the impact of eight successive interest rate increases since March 2022 on the Ontario real estate market after rates hit historic lows during the height of the pandemic.

The report found that properties held for less than a year increased to 22 per cent of all transactions in the province at the end of last year and the first quarter of 2023, which “may suggest home ownership stress for those who purchased at the peak of the housing market.” Historically, this figure sits around 15 per cent.

Emily Cheung, the director of Data, Analytics and Insights at Teranet, said the “holding period” as they call it, “has been steady Eddie for the last five to 10 years, both before the pandemic, and through the pandemic and now we’re seeing the differing trends.”

This trend was even more pronounced with condos, and in the GTA.

A third of Ontario condos sold were owned for less than a year in 2022, up from less than a quarter.

In the GTA, properties sold within a year went from 20 per cent in the first quarter of 2022, to about 29 per cent in the fourth quarter of that year, before dropping slightly to about 24 per cent in the first quarter of 2023.

“That is something we’re keeping an eye on and we’ll continue to do so throughout the further changes in the interest rate market,” Cheung said.

Ira Jelinek, a sales rep with Harvey Kalles Real Estate, said the numbers “make sense,” although he doesn’t personally have any clients in that situation.

“It’s a lot of people that just can’t afford their payments anymore,” he said.

With higher interest rates at play, Teranet also found a greater proportion of buyers purchasing without a mortgage, especially multi-property owners. Cheung said this “raises questions” about where these buyers are getting their financing from.

As well, the report concluded that the “premium” property segment, defined as properties in the top 25 per cent of sales values for a given calendar year, grew significantly during the peak of the pandemic housing frenzy. But these properties were also more susceptible to interest rate hikes.

“During those two years it was really the premium market that was carrying that peak, as interest rates started to rise you can see that it dropped much more dramatically than the moderate market,” Cheung added.

Areas outside of cities grew more in value than urban ones, although it’s not clear yet if values will decline as people who left during the pandemic return to downtowns, Teranet’s report added.

The Bank of Canada held interest rates at 4.5 per cent this spring, but there’s some speculation it may raise the overnight rate slightly at the upcoming announcement on June 7.

After the pause there was a bump in sales and prices, Jelinek said, as many believed it was a signal that increases were over.

“Now it will be really interesting to see what happens if they increase again.”

May Warren is a Toronto-based housing reporter for the Star. Follow her on Twitter: @maywarren11